A nation's production possibilities frontier is bowed outward. Suppose that the government decides to increase the production of armaments by $20 billion, and that as a result the output of consumer goods falls by $20 billion. If a further $20 billion increase beyond the initial $20 billion increase in armaments output is sought, we can expect that the output of consumer goods and services will fall further by

Question

Quizplus · Accepted Answer

A bowed-outward production possibilities frontier indicates increasing opportunity costs. Therefore, increasing armaments production further will result in a larger decrease in consumer goods output.

A Nation's Production Possibilities Frontier Is Bowed Outward